Variety reports that McConaughey is being lined up to play the film's titular role, a fugitive who strikes up an unlikely friendship with a 14-year-old boy.
The Tree of Life star Tye Sheridan is talks to play the boy, while Witherspoon will play the love of Mud's life, Juniper.
Mud will be both written and directed by Jeff Nichols, currently best known for critical darling Take Shelter, which took home the 'Nespresso Grand Prize' at Cannes Film Festival this year.
The film's lead role was previously linked to Star Trek actor Chris Pine, and it is unknown why McConaughey was brought on board instead.
Watch the trailer for Jeff Nichols' critically acclaimed film Take Shelter below: